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Sigma Capital - Financial Intelligence 101 - Options Lesson
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Bullish
Bearish
Volatile
Flat1  |  Flat 2
Buy Instrument
Stock / Futures Index, Forex,
Commodity etc
Short Sell Instrument
Stock / Futures Index, Forex,
Commodity, etc
Delta Neutral
Butterfly Call
Butterfly Put
Buy Call
Buy Put
For Gapping Market
DB Straddle =
Buy Call + Put ATM
Iron Condor
CR Call Spread +
CR Put Spread
Buy DB Bull Call Spread
Buy DB Bear Put Spread
For Gapping Market
DB Strangle =
Buy Call + Put OTM
CR Strangle
Sell CR Put (Naked)
Sell CR Call (Naked)
  CR Straddle
Sell CR Bull Put Spread
Sell CR Bear Call Spread
Call Back Spread
Call Ratio Spread
Covered Call
Covered Put
Put Back Spread
Put  Ratio Spread
Buy Stock +
Protective Buy Put
Sell Stock +
Protective Buy Call
  Horizontal Spread or
Calendar Spread
Diagonal Spread
    Diagonal Spread
Call Back Spread
Put Back Spread
  Sell CR Call (Naked)
Ratio Put Spread
Ratio Call Spread
  Sell CR Put (Naked)
Collar (see Flat strategy)
Collar (see Flat Strategy)
Collar (see Flat Strategy)
Collar
      Covered Call
      Covered Put
      Sell CR Bull   Put Spread
      Sell CR Bear Call Spread
80% T-Bonds + 10% MM
80% T-Bonds + 10% MM
80% T-Bonds + 10% MM
80% T-Bonds + 10% MM
 
Strategy Flat / Sideways 1
Strategy Flat / Sideways 2
Bullish Strategy
/ Flat
 
Sell CR Put (Naked)
Sell Lower Strike Put  - OTM (Further DOWN from stock Price)
Market is Up-Trending, Bullish view. Stock is at 30. Objective is to earn Premium from Options Time Value

  • Sell Put Options Strike 24 @    +0.5
  •                           -> Total CR = +0.5 i.e Max Profit
  • Max Loss  = (24). Optional Setting Stop Loss Put Options (1) at a total of (1.5)
  • Max Profit = Premium = +0.5
  • Net profit  = Premium = +0.5
  • ROI = Profit/Deposit   = Variable
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock >= 24
Expiry Day
Stock = 23.5
Expiry Day
Stock = 20
 
Sell CR Put (Naked)
price now
P/L
price now
P/L
price now
P/L
price now
P/L
   
                       
Sell P 24 @
_+0.5_
0
+0.5
0
+0.5
(0.5)
0
(4)
(3.5)
   
  +0.5
0
+0.5
0
+0.5
(0.5)
0
(4)
(3.5)
   
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt CR
Net P/L
Lmt DB
Net P/L
   
Total
P/L ->
  +$50
  +$50
  0
  ($350)
   
ROI
P/DB->
  +$50
  +$50
  BEP
       
 
Bullish Strategy
/ Flat
 
Sell CR Put (Naked)
  • Limited Profit = +0.5
  • Max Loss from (Strike-CR) 23.5 to Zero (or use Stop Loss)
Sell CR Put – Profit & Loss Diagram
Market View
Bearish
▬▬▬o▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Bullish Strategy
/ Flat
 
Sell CR Bull Put Spread
  • Sell Higher Strike Put - Near The Money or ATM (near stock price)
  • Buy Lower Strike Put - OTM (Further DOWN from stock Price)
Market is Uptrending, Bullish view. Stock is at 30. Objective is to earn Premium from Options Time Value and limit our risk
against sudden drop of the stock price.

  • Sell Put Options Strike 30 @       +2
  • Buy Put Options Strike 28 @     (0.5)                 -> Total CR = +1.5 i.e Limited Max Profit
  • Max Loss  = Size   = (2)
  • Max Profit = CR     = +1.5
  • Net Loss   = Size - CR = 2 - 1.5  = (0.5)  -> Total DB = (0.5) i.e Limited loss & Deposit
  • ROI = Profit/DB = 1.5/0.5 = 300%
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock = 36
Expiry Day
Stock = 28.5
Expiry Day
Stock = 28
Expiry Day
Stock = 20
CR Bull Put Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Sell P 30 @
+2.0
0
+2.0
0
+2.0
(1.5)
+0.5
(2)
0.0
(10)
(8.0)
Buy P 28 @
_(0.5)_
0
(0.5)
0
(0.5)
0
(0.5)
0
(0.5)
+8
+7.5
  +1.5
0
+1.5
0
+1.5
(1.5)
0
(2)
(0.5)
(2)
(0.5)
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$150
  +$150
  0
  ($50)
  ($50)
ROI
P/DB->
  +300%
  +300%
  BEP
       
 
Bullish Strategy
/ Flat
 
Sell CR Bull Put Spread
  • Limited Profit from CR                       = +1.5
  • Limited Loss from (Size - CR) 2-1.5 = (0.5)
Sell CR Bull Put Spread – Profit & Loss Diagram
Market View
Bearish
▬▬▬o▬
Bullish
Risk
Safe
▬o▬▬▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Bullish Strategy
/ Flat
 
Buy DB ATM Covered Call Spread
  • Buy Stock   - at current market price
  • Sell Call      - ATM (More Time Value) -> For Beginner
Market is Uptrending, Slightly Bullish or Flat view. Stock is at 30. Objective is to earn Options Time Value or Raising stock
price

  • Sell Call Options Strike 30 @     +2
  • Buy Stock                           @    (30)       -> Total DB = (28) i.e Cheaper than Buy stock only
  • Max Loss  = DB   = (28)
  • Max Profit = (till Call Strike 30 + TV) - DB = 30 - 28 = + 2
  • Net profit  = (till Call Strike 30 + TV) - DB = 30 - 28 = + 2
  • ROI = Profit/DB = 2/28 = 7% in one month
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock = 36
Expiry Day
Stock = 28
Expiry Day
Stock = 27
Expiry Day
Stock = 20
DB ATM Cov Call Sp
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Sell C 30 @
+2
0
+2
(6)
(4)
0
+2
0
+2
0
+2
Buy Stock@
(30)
+30
0
+36
+6
28
(2)
27
(3)
20
(8)
  (28)
+30
+2
+30
+2
28
0
27
(1)
20
(6)
Total
DB
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Total
P/L ->
  +$200
  +$200
  0
  ($100)
  ($600)
ROI
P/DB->
  +7%
  +7 %
  BEP
       
 
Bullish Strategy
/ Flat
 
Buy ATM DB Covered Call Spread
  • Limited Profit =  TV   = +2
  • Max Loss = Total DB  = 28
Buy ATM DB Covered Call Spread – Profit & Loss Diagram
Market View
Bearish
▬▬▬o▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Bullish Strategy
/ Flat
 
Buy DB ITM Covered Call Spread
  • Buy Stock   - at current market price
  • Sell Call      - ITM (Less Time Value) -> For Beginner & Intermediate
Market is Uptrending, Slightly Bullish or Flat view. Stock is at 30. Objective is to earn Options Time Value or Raising stock
price

  • Sell Call Options Strike 25 @    +5.5
  • Buy Stock                           @    (30)       -> Total DB = (24.5) i.e Cheaper than Buy stock only
  • Max Loss  = DB          =  (24.5)
  • Max Profit = (till Call Strike 25 + TV) - DB = 25 - 24.5 = + 0.5
  • Net profit  = (till Call Strike 30 + TV) - DB = 25 - 24.5 = + 0.5
  • ROI = Profit/DB = 0.5/24.5 = 2% in one month
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock >= 25
Expiry Day
Stock = 24.5
Expiry Day
Stock = 23.5
Expiry Day
Stock = 20
DB ITM Cov Call Sp
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Sell C 25 @
+5.5
(5)
+0.5
0
+5.5
0
+5.5
0
+5.5
0
+5.5
Buy Stock@
(30)
+30
0
+25
(5)
+24.5
(5.5)
+23.5
(6.5)
+20
(10)
  (24.5)
+25
+0.5
+25
+0.5
+24.5
0
+23.5
(1)
+20
(4.5)
Total
DB
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Total
P/L ->
  +$200
  +$200
  0
  ($100)
  ($450)
ROI
P/DB->
  +7%
  +7 %
  BEP
       
 
Bullish Strategy
/ Flat
 
Buy ITM DB Covered Call Spread
  • Limited Profit =  TV   = +2
  • Max Loss = Total DB  = 28
Buy ITM DB Covered Call Spread – Profit & Loss Diagram
Market View
Bearish
▬▬▬o▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Bearish Strategy
/ Flat
 
Sell CR Call (Naked)
  • Sell Higher Strike Call  - OTM (Further UP from stock Price)
Market is Uptrending, Bullish view. Stock is at 30. Objective is to earn Options Time Value

  • Sell Call Options Strike 36 @    +0.5
  •                           -> Total CR = +0.5 i.e Max Profit
  • Max Loss  = (Unlimited).Optional Setting Stop Loss Call Options (1) at a total of (1.5)
  • Max Profit = Premium = +0.5
  • Net profit  = Premium = +0.5
  • ROI = Profit/Deposit   = Variable
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock <= 36
Expiry Day
Stock = 36.5
Expiry Day
Stock = 40
 
Sell CR Call (Naked)
price now
P/L
price now
P/L
price now
P/L
price now
P/L
   
                       
Sell C 36 @
_+0.5_
0
+0.5
0
+0.5
(0.5)
0
(4)
(3.5)
   
  +0.5
0
+0.5
0
+0.5
(0.5)
0
(4)
(3.5)
   
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt CR
Net P/L
Lmt DB
Net P/L
   
Total
P/L ->
  +$50
  +$50
  0
  ($350)
   
ROI
P/DB->
  +$50
  +$50
  BEP
       
 
Bearish Strategy
/ Flat
 
Sell CR Call (Naked)
  • Limited Profit  = +0.5
  • Unlimited if stock >36.5 (or use Stop Loss)
Sell CR Call – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Bearish Strategy
/ Flat
 
Sell CR Bear Call Spread
  • Sell Lower Strike Call - Near The Money or ATM (near stock price)
  • Buy Higher Strike Call - OTM (Further UP from stock Price)
Market is Down-Trending, Bearish view. Stock is at 30

  • Sell Call Options Strike 30 @       +2
  • Buy Call Options Strike 32 @     (0.5)                 -> Total CR = +1.5 i.e Limited Max Profit
  • Max Loss  = Size   = (2)
  • Max Profit = CR     = +1.5
  • Net Loss   = Size - CR = 2 - 1.5  = (0.5)  -> Total DB = (0.5) i.e Limited loss & Deposit
  • ROI = Profit/DB = 1.5/0.5 = 300%
 
Initial Stock 30
Expiry Day
Stock <= 30
Expiry Day
Stock = 24
Expiry Day
Stock = 31.5
Expiry Day
Stock = 32
Expiry Day
Stock = 40
CR Bear Call Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Sell C 30 @
+2.0
0
+2.0
0
+2.0
(1.5)
+0.5
(2)
0.0
(10)
(8.0)
Buy C 32 @
_(0.5)_
0
(0.5)
0
(0.5)
0
(0.5)
0
(0.5)
+8
+7.5
  +1.5
0
+1.5
0
+1.5
(1.5)
0
(2)
(0.5)
(2)
(0.5)
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$150
  +$150
  0
  ($50)
  ($50)
ROI
P/DB->
  +300%
  +300%
  BEP
       
 
Bearish Strategy
/ Flat
 
Sell CR Bear Call Spread
  • Limited Profit from CR                       = +1.5
  • Limited Loss from (Size - CR) 2-1.5 = (0.5)
Sell Cr Bear Call Spread – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬o▬▬▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Bearish Strategy
/ Flat
 
Covered Put Spread
  • Sell Stock   - at current market price
  • Sell Put      - ATM (More Time Value) -> For Beginner
Market is Down-Trending, Slightly Bearish or Flat view. Stock is at 30. Objective is to earn Options Time Value or drop from
the instrument price

  • Sell Put Options Strike 30 @     +2
  • Sell Stock                           @    30       -> Total = (32) i.e Better than Sell stock only
  • Max Loss  = Unlimited   = if stock >32
  • Max Profit = (max CR 32 - strike Put) 32 - 30  = 32 - 30 = + 2
  • Net  Profit = (max CR 32 - strike Put) 32 - 30  = 32 - 30 = + 2
  • ROI = Profit/DB = 2/28 = 7% in one month
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock = 24
Expiry Day
Stock = 32
Expiry Day
Stock = 33
Expiry Day
Stock = 40
Cov Put Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Sell P 30  @
+2
0
+2
(6)
(4)
0
+2
0
+2
0
+2
Sell Stock@
30
(30)
0
(24)
+6
(32)
(2)
(33)
(3)
(40)
(8)
  32
(30)
+2
(30)
+2
(32)
0
(33)
(1)
(40)
(6)
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$200
  +$200
  0
  ($100)
  ($600)
ROI
P/DB->
  +7%
  +7 %
  BEP
       
 
Bearish Strategy
/ Flat
 
Covered Put Spread
  • Limited Profit = TV = +2
  • Max Loss = Unlimited if stock > 32
DB Covered Put Spread – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Bearish Strategy
Flat Strategy
 
Ratio Call Spread =
Buy 1 Call ATM & Sell 2 Call OTM
  • Buy 1X ATM Call Options (Near the Stock Current Price)
  • Sell 2X OTM Call Options (Further UP  from the Stock Current Price)
Market is Down-Trending, Bearish but Flat. Objective is to earn Premium from Options Time Value and Profit from long
options if the market is up but only a little.

  • Sell 2 X OTM Call Options Strike  32 @ +2 X 2 = +4
  • Buy 1 X ATM  Call Options Strike 30 @                 (3)    -> Tot CR = +1  
  • Max Loss      = Un-Limited if stock is UP >35
  • Max Profit  1 = +1                                              ->If stock <30, Profit From Credit = +1
  • Max Profit  2 = +3 If stock = 32
  • BEP              =  35

  • If stock goes down   < 30, our total profit is only  = +1
  • If stock goes up        = 32, our total profit is max  = + 3
 
Initial Stock 30
Expiry Day
Stock <= 30
Expiry Day
Stock = 32
Expiry Day
Stock = 35
Expiry Day
Stock = 36
Expiry Day
Stock =40
Ratio Call Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
S 2*C32@2
+4
0
+4
0
+4
(6)
(2)
(8)
(4)
(16)
(12)
B 1*C30@3
(3)
0
(3)
+2
(1)
+5
+2
+6
+3
+10
+7.0
  +1.0
0
+1
+2
+3
(1)
0
(2)
(1)
(6)
(5.0)
Total
CR
Lmt DB
Net P/L
Lmt CR
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$100
  +$300
  0
  ($100)
  ($500)
ROI
P/DB->
      Max
  BEP
       
 
Bearish Strategy
Flat Strategy
 
Ratio Call Spread =
Buy 1 Call ATM & Sell 2 Call OTM
  • Limited Profit = +3 if stock =32 and Limited Profit = + 1 if stock <30
  • Un-Limited Loss   =  If stock > 34
Ratio Call Spread – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Bullish Strategy
Flat Strategy
 
Ratio Put Spread =
Buy 1 Put ATM & Sell 2 Put OTM
  • Buy 1X ATM Put Options (Near the Stock Current Price)
  • Sell 2X OTM Put Options (Further DOWN from the Stock Current Price)
Market is Up-Trending, Bullish Buy Flat. Objective is to earn Premium from Options Time Value and Profit from long options
if the market is down but only a little.

  • Sell 2 X OTM Put  Options Strike 28 @ +2 X 2 = +4
  • Buy 1 X ATM  Put Options Strike 30 @                 (3)    -> Tot CR = +1  
  • Max Loss      = (25) if stock < 25
  • Max Profit  1 = +1                                              ->If stock >30, Profit From Credit = +1
  • Max Profit  2 = +3 If stock = 28
  • BEP              =  25

  • If stock goes Up      > 30,  our total profit is only = +1
  • If stock goes Down  = 28, our total profit is max  = + 3
 
Initial Stock 30
Expiry Day
Stock >= 30
Expiry Day
Stock = 28
Expiry Day
Stock = 25
Expiry Day
Stock = 24
Expiry Day
Stock =20
Ratio Put Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
S 2*P28@2
+4
0
+4
0
+4
(6)
(2)
(8)
(4)
(16)
(12)
B 1*P30@3
(3)
0
(3)
+2
(1)
+5
+2
+6
+3
+10
+7.0
  +1.0
0
+1
+2
+3
(1)
0
(2)
(1)
(6)
(5.0)
Total
CR
Lmt DB
Net P/L
Lmt CR
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$100
  +$300
  0
  ($100)
  ($500)
ROI
P/DB->
      Max
  BEP
       
 
Bullish Strategy
Flat Strategy
 
Ratio Put Spread =
Buy 1 Put ATM & Sell 2 Put OTM
  • Limited Profit = +3 if stock =32 and Limited Profit = + 1 if stock <30
  • Un-Limited Loss   =  If stock > 34
Ratio Put Spread – Profit & Loss Diagram
Market View
Bearish
▬▬▬o▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Flat Strategy
   
Sell - CR Straddle
Sell 1 Call ATM & Sell 1 Put ATM
  • Sell 1X ATM Call Options (Near the Stock Current Price)
  • Sell 1X ATM Put Options (Near the Stock Current Price)
Market is Flat. Objective is to earn Premium from Options Time Value . (Note: This is NOT for Beginner)

  • Sell 1 X ATM Call  Options Strike 30 @ +2
  • Sell 1 X ATM  Put Options Strike 30 @  +2      -> Tot CR = +4  
  • Max Loss      = Unlimited
  • Max Profit     = +4                                 ->If stock = 30, on expiry day. Profit From Credit = +4
  • BEP 1           = 34 [Strike Call 30 + Total Premium Credit +4]
  • BEP 2           = 26 [Strike  Put 30 -  Total Premium Credit +4]

  • If stock goes Up      > 34,  Unlimited Loss for Call
  • If stock goes Down  < 26,  Maximum Loss from Put = 26
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock = 26
Expiry Day
Stock = 34
Expiry Day
Stock = 20
Expiry Day
Stock =40
CR Straddle
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
S 1*C 30 @
+2
0
+2
0
+2
(4)
(2)
0
+2
(10)
(8)
S 1*P 30 @
+2
0
+2
(4)
(2)
0
+2
(10)
(8)
0
+2
  +4
0
+4
(4)
0
(4)
0
(10)
(6)
(10)
(6)
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$400
  0
  0
  ($600)
  ($600)
ROI
P/DB->
  MAX
  BEP
  BEP
       
 
Flat Strategy
   
Sell - CR Straddle
Sell 1 Call ATM & Sell 1 Put ATM
  • Limited Profit = +4 if stock =30
  • Un-Limited Loss   =  If stock > 34 & Maximum Loss 26 if stock < 26
Sell - CR Straddle – Profit & Loss Diagram
Market View
Bearish
▬▬o▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Flat Strategy
   
Sell - CR Strangle
Sell 1 Call OTM & Sell 1 Put OTM
  • Sell 1X OTM Call Options (Higher than the Stock Current Price)
  • Sell 1X OTM Put  Options (Lower  than the Stock Current Price)
Market is Flat. Objective is to earn Premium from Options Time Value . (Note: This is NOT for Beginner)

  • Sell 1 X OTM Call  Options Strike 40 @ +1
  • Sell 1 X ATM  Put  Options Strike 20 @ +1      -> Tot CR = +1  
  • Max Loss      = Unlimited
  • Max Profit     = +2                                 ->If stock = 30, on expiry day. Profit From Credit = +2
  • BEP 1           = 42 [Strike Call 40 + Total Premium Credit +2]
  • BEP 2           = 18 [Strike  Put 30 -  Total Premium Credit +2]

  • If stock goes Up      > 42,  Unlimited Loss for Call
  • If stock goes Down  < 18,  Maximum Loss from Put = 18
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock = 18
Expiry Day
Stock = 42
Expiry Day
Stock = 15
Expiry Day
Stock =45
CR Strangle
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
S 1*C 40 @
+1
0
+1
0
+1
(2)
(1)
0
+1
(5)
(4)
S 1*P 20 @
+1
0
+1
(2)
(1)
0
+1
(5)
(4)
0
+1
  +2
0
+2
(2)
0
(2)
0
(5)
(3)
(5)
(3)
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$200
  0
  0
  ($300)
  ($300)
ROI
P/DB->
  MAX
  BEP
  BEP
       
 
Flat Strategy
   
Sell - CR Strangle
Sell 1 Call OTM & Sell 1 Put OTM
  • Limited Profit = +2 if stock =30
  • Un-Limited Loss   =  If stock > 42 & Maximum Loss 18 if stock < 18
Sell - CR Strangle – Profit & Loss Diagram
Market View
Bearish
▬▬o▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
“Trading Futures instruments such as Index, Foreign exchange, Commodity, Bonds, or other high leverage instruments on margin carries a high level of risk,
and may not be suitable for all investors
. The high degree of leverage can work against you as well as for you. Before deciding to invest in these high
leverage instruments you should carefully consider your investment objectives, level of experience, and risk appetite.

The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to
lose.
You should be aware of all the trading risks associated with all of these instruments, and seek advice from an independent financial advisor if you
have any doubts.”